Correlation Between Nasdaq 100 and 10 Year

Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and 10 Year at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nasdaq 100 and 10 Year into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 and 10 Year T Note Futures, you can compare the effects of market volatilities on Nasdaq 100 and 10 Year and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nasdaq 100 with a short position of 10 Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and 10 Year.

Diversification Opportunities for Nasdaq 100 and 10 Year

-0.73

Correlation Coefficient

Nasdaq 100  10 Year

Pay attention - limited upside

The 3 months correlation between Nasdaq and ZNUSD is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 and 10 Year T Note Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 10 Year T and Nasdaq 100 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nasdaq 100 are associated (or correlated) with 10 Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 10 Year T has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and 10 Year go up and down completely randomly.

Pair Corralation between Nasdaq 100 and 10 Year

Assuming the 90 days horizon Nasdaq 100 is expected to under-perform the 10 Year. In addition to that, Nasdaq 100 is 4.48 times more volatile than 10 Year T Note Futures. It trades about -0.1 of its total potential returns per unit of risk. 10 Year T Note Futures is currently generating about 0.1 per unit of volatility. If you would invest  10,897  in 10 Year T Note Futures on December 29, 2024 and sell it today you would earn a total of  228.00  from holding 10 Year T Note Futures or generate 2.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Nasdaq 100  vs.  10 Year T Note Futures

Nasdaq 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Commodity's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Nasdaq 100 shareholders.

10 Year T

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 10 Year T Note Futures are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, 10 Year is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nasdaq 100 and 10 Year

The main advantage of trading using opposite Nasdaq 100 and 10 Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, 10 Year can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in 10 Year will offset losses from the drop in 10 Year's long position.

The idea behind Nasdaq 100 and 10 Year T Note Futures pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..